Step forward to categorize businesses as Eurasian rather than nationally specific, will spur Eurasian M&A boom

The Eurasian Economic Union (EAEU) the free trade area between China and the European Union, and lead by Russia, has agreed to the creation of a new legal space for transnational companies. Chairman of the Board of the Eurasian Economic Commission, Tigran Sargsyan confirmed this step during a briefing following the session of the Eurasian Intergovernmental Council in Cholpon Ata, Kyrgyzstan.

According to him, the Board has been assigned to carry out relevant works, as well as to define, based on international practice, the scope in which such companies will receive privileges in order to enable ease of cross-border operations, to contribute to the establishment of specific qualifications and procedures so that companies with a cross-border Eurasian presence are better able to work in the territories of each of the EAEU nations and to stimulate them to increase national export volumes. The EAEU includes Armenia, Belarus, Kyrgyzstan, Kazakhstan and Russia, while China, Iran, Serbia and Vietnam already have or are about to have free trade agreements with the bloc. Other countries such as Singapore, India, Indonesia, Turkey and Egypt among others are expected to follow. Intra-EAEU trade has been increasing at rates of 35% per annum for the past three years, while customs protocols to properly unify duties are close to completion.

“We believe such privileges will promote the establishment of large Eurasian transnational companies.” Sargsyan said.

The move to provide a legally specific basis for this is likely to introduce a boom in Eurasian M&A as businesses look to combine resources to develop larger Eurasian networks and become dominant players. As foreign investment and domicilation is permitted in each of the EAEU countries, this opens the door to foreign investors to establish a business in for example Armenia, apply for the proposed EAEU legal status and the trade benefits this is expected to bring.

Should Singapore, as has been mooted and is currently being negotiated, emerge as a full Free Trade Partner with the EAEU, we may expect that such a deal may also provide for allowing Eurasian based MNC’s the ability to raise finance on the Singapore bourse. We are aware that such discussions have been taking place.

The first step is to understand the process of what the EAEU means by defining such businesses. Secondly, what trade incentives will be provided. This can be expected to be clarified within the next 12 months. Following this, an announcement that Singapore has joined the EAEU as an FTA partner will almost certainly provide an Asian window for raising finance for Eurasian businesses in Asia. When this happens, the Eurasian region is likely to become the latest new hot area for lawyers and financiers.

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